Labor policy backdowns erode Shorten’s credibility

Opposition frontbenchers like to boast Labor has done the policy work needed to govern. On key issues, however, Bill Shorten has been caught out issuing impetuous thought-bubbles. When they do not stand up to scrutiny, they lead to half-baked backdowns. The latest example, as Joe Kelly writes today, is the Opposition Leader’s reportedly secret pledge to modify his policy to cap health insurance premium rises at 2 per cent for two years. The exemptions that smaller, regional and not-for-profit funds favoured by unions expect from a Shorten government could wreak chaos in the health insurance sector. The changes would anger members, who would be asked to pay more in premium rises, and skew the market as members tried to move to the larger funds that would be subject to the price cap. Especially disadvantaged would be members of smaller funds whose pre-existing conditions made it harder to switch.

This would not be the first time a Shorten policy produced unintended consequences and a partial backflip. In March, Mr Shorten pitched a major tax snatch to stamp out “millionaire welfare”, announcing he would take away the tax refunds provided to retirees by franking credits from share dividends. The implications sank in fast. The policy would have hurt many people on modest incomes, including 306,000 age pensioners. Within a fortnight, Labor buckled by exempting pensioners. Even so, the policy caused widespread resentment. In April we reported that it would hit 2.6 million superannuation accounts.

In a more recent captain’s call, Mr Shorten announced Labor would increase company tax for 20,000 businesses with turnovers of $10 million to $50m. The flip-flop came a few days later when he announced he would leave in place the company tax cuts already granted by the Turnbull government for those businesses and repeal those that have been legislated but are yet to take effect, leaving the rate at 27.5 per cent.

Such ineptitude over issues that go to the heart of living standards, jobs and economic security help explain why Mr Shorten trails Malcolm Turnbull by 19 points as preferred prime minister. Today’s Newspoll shows this is the widest gap between the two leaders since May 2016, before the last election. The looming row over capping health fund premiums could only exacerbate the impression that Mr Shorten is out of his policy depth.

The secret health fund deal, revealed in an email marked “strictly confidential” and “not for circulation”, details a private meeting between him and Matthew Koce, chief executive of the Members Health Fund Alliance, which represents 23 smaller funds.

The issue has the potential to affect the Braddon by-election on July 28. As Dennis Shanahan reported recently, small health funds in Tasmania, with thousands of members in Braddon, fear financial failure, job losses and cost cutting under Labor’s 2 per cent cap on premium rises. They include union-affiliated funds covering timber workers, midwives and Construction Forestry Maritime Mining and Energy Union members, a strong power base for Mr Shorten. The union connection prompted Health Minister Greg Hunt to suggest Mr Shorten has done “a secret deal to protect his union mates”.

A partial retreat by Labor on its cap would force fund members to pay more. But the funds would lose out if members took their business elsewhere. It remains to be seen whether these concerns will prompt Mr Shorten to backflip from his partial retreat.